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The following article was published in our article directory on August 28, 2012.
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Article Category: Advice
Author Name: Loren Gill
So you responded to the call and are heading out to be a missionary? After your education and training the time has come to leave home and go to a foreign nation. The airline tickets are purchased. Contributions and pledges are coming in. Now is the time to ensure that your economic scenario is in order prior to leaving and that you understand just what you will certainly need to prepare come tax time.
1. As a missionary you are not exempt from United States taxes. You must recognize that United States citizens have to file an annual tax return even when living in a foreign nation.
U. S. persons are taxed on total world earnings. Don't believe veteran missionaries who tell you that you are exempt from taxes. This is just partially real and relies on exactly how much you earn during the year and whether or not you file the foreign earned income exemption on IRS form2555. No matter whether or not you file the exemption, the majority of the missionaries will have to pay social security or self-employment tax on their net earnings. Inappropriate planning in this area alone has forced lots of missionaries to go back to the US and seek routine work so that they can begin to pay their accumulated tax liability.
2. Missionaries have to track their income and expenditures for proper tax reporting.
As a missionary, you are basically operating a company, and as all companies must track just how much they make and expend on the business, so must you. This is made even more difficult because the outputs are usually in a foreign currency and should be converted into US currency for tax reporting.
3. Prior to packing up and moving overseas it is wise to schedule economic and legal counsel
It is so much more difficult to find great qualified monetary and legal assistance after you have actually moved to the middle of nowhere. You ought to look for advice from the legal profession in areas such as establishing a will or living trust. Exactly what should be done if you are killed or injured in the foreign country? From a tax viewpoint you ought to find a tax preparer who recognizes the foreign earned income credit (form2555) and the foreign tax credit (form 1116). If you are an ordained member of the clergy you might want to explore opting out of Social Security or getting a housing allowance.
If you are not ordained you may want to think about coming to be so before leaving for the mission station. If you are an independent missionary and not part of a recognized sending company you may have to think about establishing a non-profit company before leaving. This will allow contributors to obtain tax deductions on their contributions, resulting in a greater chance that you get higher support for your mission undertakings.
Keywords: missionary, taxes, overseas, clergy
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